Reflecting on Freight: Diving into Industry Challenges and Insights From This Year | Episode 224

Nate Cross: 0:19

All right, welcome back for the final episode of 2023 of the Freight 360 podcast. If you're brand new here, please check out all of our other episodes. There's 224 in total. Now Check out YouTube and all everywhere on social media. Make sure to leave us comments, hit the subscribe the bell all that good stuff and if you'd like to learn more about us and our content, you can always go to freight360.net and check out the Freight Broker Basics course for a full-length self-paced course on how to succeed in freight brokerage. Ben, wrapping up the year here, man, how are you doing today? Doing well.

Benjamin Kowalski: 1:04

Enjoying my semi-vacation time off between Christmas and New Year's.

Nate Cross: 1:10

Yeah, I was. So it's funny. I was like yesterday, well, today's Wednesday, as we're recording, but yesterday was the day after Christmas and I had to hop in my office get some stuff done. My wife's like I thought you were like, you know, slow week gonna be office week and I'm like, well, no, like it's definitely solar but there's still, like still stuff going on. You know what I mean. Little issues pop up here and there to handle. But yeah, it's nice, man, I love this time of year. It kind of like lets you reflect back on all the hard work from the whole calendar year and we're gonna talk about that actually a lot today. We're gonna talk about kind of the year review and just some like you know the state of the market and you know some little tips and tricks on how to go the extra mile with your customer. So, yeah, it's a nice slow week.

Nate Cross: 1:54

But it was a weird Christmas, man. Like we had almost 60 degree weather here in Buffalo. There's no snow on the ground anymore. It's been like, yeah, like mild the last like week. We have another few weeks or, I'm sorry, another few days of mild weather. I think then it's gonna drop down, probably around New Year's, into what we normally would experience for winter time. Dude, I wore shorts on Christmas. It was crazy, that's so funny.

Benjamin Kowalski: 2:20

Like we had the opposite. We had like absolutely had like two cold fronts come in over the past two weeks, so from like the 17th or 18th it was like hitting the 60s, even the high 50s, and it was overcast. Like it was like funny. I was telling my dad. I was like it's like Pittsburgh fall.

Benjamin Kowalski: 2:38

I was like basically I'm like it's like 60s 70s. The sun hasn't been out in two or three days, but for me it was like kind of nice again because, like Christmas, you kind of want to sit inside. It's a little again. I've been here for like eight or nine years and when it's like super hot outside and the sun's shining and it's like Christmas day, like you kind of don't want to be inside, you still want to go outside. So it was like nice that we were all just kind of hung out at home, let it play with all of our toys and do like a normal kind of Christmas thing where you're just kind of inside and enjoying the yeah, it was funny.

Nate Cross: 3:11

I was talking to my brother-in-law, I was down in Dallas and he's like it's literally warmer in Buffalo than it is here in Texas right now and I'm like, eh is what it is, man, I'll take it for sure. Hey, NFL update here. So this past Saturday was it Saturday? Yeah, Saturday, it was a game, right, so it was an interesting. Basically everything went the way that Bill wanted to.

Nate Cross: 3:39

Stephen, why don't you unmute yourself and hop in the conversation here, because you're a sincey guy, but it starts off with the Steelers and the Bengals. And man, was that something? Trash, trash.

Benjamin Kowalski: 3:54

It was an entertaining game. I'll say that.

Nate Cross: 3:57

Yeah, it was a. I got excited for all of five seconds and I was like, okay, I can go back to not watching this anymore. Yeah, definitely, that game was was pretty much all Steelers. So what was the final 3411? Yeah, it was 24, zero at halftime, steelers. But yeah, steelers walked away with the win there.

Nate Cross: 4:21

The bills game right afterward got me a little nervous because the bills were down 10, nothing in the second quarter. But then they quickly turned down their their offense and got the ball moving and took the W. So bills took the win and put themselves in the driver's seat to make the playoffs now. So a couple other games went the bills way. For example, let's see the Colts lost to the Falcons. And was there anything else? Bills beat the Texans, jaguars lost to the box. Yeah, I guess a lot went the bills way, except for the dolphins pulled off a win which you know those fans would hope would go the other way. But also the Broncos lost to the Patriots. So yeah, a lot of stuff with the bills way. And now that it's looking pretty good for Buffalo, we still got to do business and close out the season. Here Got a new England Patriots who we had a set up, set to earlier in the season, will be playing New Year's Eve. I'll be at the game and it's gonna make for a long one o'clock.

Benjamin Kowalski: 5:26

That could be. Billa checks last game as a Patriots coach. Right, Didn't they announce he wasn't coming back?

Nate Cross: 5:32

There's still two weeks left, I thought next. No, there was the final week. Now you got to because, yeah, we've got the bills, have New England and then Miami close out the season, so yeah. But you're right, belichick, well, hey, it'll be his last time playing in Orchard Park at least. So good riddance. I mean, they got a great career.

Benjamin Kowalski: 5:52

But I think you'll retire.

Nate Cross: 5:54

I think, he's done, I think yeah, instead of him being fired, I think he'll step down and, you know, kind of sail off into the sunset.

Nate Cross: 6:01

So genius coach, but he had Tom Brady for almost all the cheating and the positions of cheating and yeah, all that stuff, the penalties for cheating and what's the little thing if you're not cheating, you're not trying, or something like that. But but hey, who knows, steven, do you have any faith in your Bengals? I think there's like a 10% chance they make the playoffs. Well, the chiefs lost to the Raiders, so there's some hope for the. Yeah, that's true, this is true. But I've been using the the New York Times like calculator. Have you seen that at all? It shows like everyone's odds. So, yeah, you have, steelers have a 12% chance. Bengals have a 19% chance. Maybe you're fighting a wild card battle against Indy, the Texans, the Raiders and the Broncos. So, who knows, we'll see man. Yeah, but anything else in sports? Oh, ben, I got something for you. Have you seen the memes? The Tiger Woods memes, the big dog?

Benjamin Kowalski: 7:09

I see that I haven't seen any of them recently, but I mean, wasn't?

Nate Cross: 7:14

that like fairly new, as like a week ago it started like blowing up all over the internet Like it's basically him about to tee off and he's got this caddy and he just goes to the dude, puts his hand out like he's gonna slap him up. He's like big dog, let's get out there and do this today or whatever it was. They like took like all the meme creators just made a ton of like freaking hilarious memes of Tiger slapping somebody up, saying big dog. There's a funny ones out there, so I check them out. That's all I got for sports, man, you got anything?

Benjamin Kowalski: 7:50

I do not. That's about all I have.

Nate Cross: 7:54

So we're going to talk a bit about the 2023 recap today. Also, next week we'll be having Ken Adamo from DAT on with us to talk you know, the market from his perspective Definitely going to pick his brain on what he thinks the 2024 landscape is going to look like. So definitely stay tuned for that one.

Nate Cross: 8:15

The reason I thought about the market was I saw this morning there was a like the freight waves newsletter that goes out.

Nate Cross: 8:23

They sent out this thing that was showing one of the sonar, like their analytics tool, the sonar I'm trying to think what you would call it the metric that tracks contract versus spot rates on average throughout the US and it showed that over the last week that that basically, spot rates took a surge, cause you know what, the last almost two years now, it's been flip-flopped and it's shown that it's taken a surge. So I checked it against rate view and it's different data, so I got conflicting reports. But anyway, it made me think where has you know where have all the rates between spot and contract? How have they trended since we started tracking this, like roughly last May, and what I have noticed if you go to rate view on DAT, whether you look at Van Reefer or Flatbed. You kind of see the same thing where the spot market has pretty much been at the bottom, if not slowly crawling out, for about six months now, whereas contract rates have just been coming down and down and down. You're sure what are you?

Benjamin Kowalski: 9:39

looking at. You got a lane you're looking at in specific.

Nate Cross: 9:40

No, I just did like the national average on rate view. So if you're on there you'll see like the gap between them is definitely less than it was before. So like if you go back to December of last year, van contract rates were at almost three bucks a mile. They're down to 250 right now, whereas so they've dropped almost 50 cents. Contract rates dropped from 240 a year ago or, I'm sorry, spot rates dropped from 240 a year ago down to 206 by May or by April 206. So they only dropped like 34 cents and they're actually I'm really seeing this hold on.

Benjamin Kowalski: 10:22

I'm in the national. Oh, I'm looking at Flatbeds. I think that's why.

Nate Cross: 10:26

If you hit Van you'll see like the spot rates kind of like bottomed out in April and they're actually higher now than they were in April. So really contract rates have come down. And I was thinking about I'm like, why would that happen? And I almost think that these customers that went into contract rates, because they went to the contract markets, because they were so worried about rates being so high before, I almost think that customers are pushing that downward. But it's interesting to see that everyone's like, oh, the worst isn't here yet. I think we've been in the worst, if not crawling out of it, for over six months now.

Benjamin Kowalski: 11:10

For sure. And then it's, I mean, anecdotal. I can't seem to get this to switch from Flatbed to Van for some reason, but absolutely. I mean I've talked to lots of managers at some of the bigger brokerages to mid-sized brokerages that are seeing this in bids and have been seeing it all year, right when we're like. I remember it was probably like June, july when I started hearing this from friends and colleagues that were just like man, I'm working through these national bids and they're like.

Benjamin Kowalski: 11:38

Somebody told me they were like this isn't June because I remember they were like 50 to 60% of the lanes that they saw and they said it was a Fortune 100 company, a name that kind of everybody would have recognized, and I don't know the name of the company was. I I didn't ask and they said, as far as vans go, he was like 60% of these lanes, the target rate on the bid. He was like you couldn't cover a load for this. He was like I mean maybe you get a truck on a backhaul, maybe, and he's like that's 60%. You're talking to hundreds of lanes, right. He's like I can't even wrap my head around why and how they're doing this. He's like I mean there are clearly paper rates, which, again for listeners out there, they refer to paper rates as a number. You put on a bid without any of intention of being able to actually get a truck, for it is what a paper is Right, it's your whole thing You're hoping and praying, but yeah.

Benjamin Kowalski: 12:30

It's a hope. And then if the market and you can get a truck for it, great. If not, you just give the loads back. Well, historically right in the market, if a shipper did that right, they're gonna get hugely penalized. And how they get penalized is if they push their contract rates too low. What happens is is, say, 40 or 50% of the carriers that are all in this bid. However, the percentage of it right, whatever that is, half of the carriers are in there. They put in numbers that are that low.

Benjamin Kowalski: 12:59

Well, as soon as the spot market is above that number, every carrier just all of a sudden their trucks are in the shop. They don't have a driver for that lane. Every excuse you've ever heard of is all the shipper hears and they can't get a truck for it. Why, opportunity cost, right? Hey, if I am going to tell a company, hey, I'll run this load for you for, say, $2 a mile all year, and then two weeks later the spot market is, I can get any load I want for $2.20 a mile. You're never picking that load up again and that's the way the market works. But since the spot market has not been above the contract market for, like you said, at the very least, a year to a year and a half, maybe longer. Now the shippers can push these rates as far as they can without worry that a truck's just gonna never pick up their freight because they can get paid more in the market. Right, and this is that pivotal moment in the market that everybody's been talking about, because when it occurs, I think and this is just my opinion shippers are gonna be in a huge amount of problems. They're gonna end up seeing large portions of their contract freight flip to spot. They're gonna service is gonna go into the garbage can and they are gonna be in the spot market for way more than they ever expected and they're gonna be at the mercy of every broker that they've been working with to get them any capacity for anything, because the trucks just aren't going to come and pick up their freight. And I think that's gonna happen.

Benjamin Kowalski: 14:31

When it happens, like we used to say it, like when we work it when I worked at TQL they would be like messages that go out over Skype when the market would flip for produce and you would see this every year because of the same Economic scenario. Right, spot market is always, and should always, be more expensive than the contract market. Because what like, if you're gonna get something delivered in two days or in two weeks, it's more expensive in a day. Right same premise. And when the produce market would flip each Individual region of the country, like we would all message each other, like the big produce brokers would send out messages Internally in the company, go like, hey, the market just flipped and you'd see Florida go outbound, you know, a dollar 20 to 350 right and like an hour and 45 minutes, and like all the watermelons hidden, all whatever's hitting.

Benjamin Kowalski: 15:18

And that's really what keeps Shippers honest and bid processes is they're terrified that if they play, overplay their hand, they get penalized and have to pay a big penalty for it. Since they've been upside down, they can kind of act with what do they call it? Like free reign or like no penalty, whatever they call that, when you can do whatever you want and they're no repercussions, no recourse, yeah, no recourse. That's the way they've been able to operate since they got slaughtered during the pandemic. But when that changes, I think this is going to see the market go back to where we need it much faster than anyone kind of expects and I think this is gonna move all the leverage from all the carriers that don't have an out right back into their corner, and I think that's really obviously what everyone's hoping for but you think it's gonna bounce back like a whiplash almost.

Benjamin Kowalski: 16:08

Yeah, but I think the two things right, because we know that the shippers are doing that like. I have not talked to anybody, in fact I've over a bit. I've worked on for every larger company. I saw the same thing all year last year. But the big, the big number that nobody knows is if the demand for trucks goes up at the same time, then it's whiplash and that just means we as a country we're gonna buy more things. So, timing right. They talk about the soft landing of the economy. If they land the economy in the way they've Expected in the past two weeks, right with all the Fed announcements and everything that sits as of the end of the year, where the market is barring anything that we don't know is gonna happen, right, which is going to happen anyway. But just say everything stays the same for the most part. If they can reduce interest rates in the second quarter, even reduce them again into the third quarter, you're gonna see not only consumer spending usually pick up.

Benjamin Kowalski: 17:04

You'll see housing pick back up right at a time for spring, which is gonna pick up all the building materials. You're gonna see renovations and those things pick up. At the same time. Companies that have kept inventories low since the pandemic because they had to keep lots of inventory, which, by the way, costs a lot of money and if you got to borrow money from a bank, that inventory is costing you profits. So they've kept inventories low and we've been buying things, but it's been kind of a give-and-take. It's nothing crazy. But if that all changes overnight at the same time, like I think you could absolutely see something similar to what you saw. Maybe don't like the ELDs, but I think you're gonna see the market moving it. If that timing happens at the same time, I think you're gonna see it spike and I think you're gonna see chaos.

Nate Cross: 17:51

So I want to read. I thought of a couple things. I'm gonna come. I'm gonna talk about tender ejection, but I'm gonna come back to that in the second, because first I wanted to read off If you guys don't get freight caviar's newsletter, it's, it's good, sign up for it.

Nate Cross: 18:06

The one that came out this week or today Featured a bunch of predictions. Mine was in there too, and I'll talk about it a second. But Tim from a centi MS I was dying laughing. So basically, paul for freight caviar went to seven Folks that are in the industry and said, like what's your prediction for 2024 for the freight market? And first he listed Tim's and it says Hold on tight. 2024 is gonna suck even more than 2023. Profit margins are down, rates are down, employee counts are down and net business formation is down. Ballyetta 24 will see things getting better. Consumer cash shed, debt, fire nonprofit will customers. So he kind of took like the Doomsday approach. But there is some good to be taken out of this and we'll talk a little bit more about customer facing stuff later on in this In this episode.

Nate Cross: 18:54

But he said fire non profitable customers. And we've had many like year-end episodes where we talked about how to, how to get your business right moving into the next year and that's one of the things that we've often talked about is there's opportunity in any market, but you need to be making sure that you're capitalizing on what's good for you and just getting rid of what's bad for you. Right, and he mentioned, like you know, save cash, get rid of that, but fire the non profitable customers. How many customers do you have right now that are Headaches to you, right? So I want to like point that out as you move into next year, your focus and energy should be focused on Good opportunity that's profitable for you, and not those low margin customers that you know. They've consistently had low rates and it's just headache after headache because that takes up time.

Benjamin Kowalski: 19:44

So when it's hard to figure out where those are right, especially if you're in a market where, I think, everyone's trying to fight To bring in whatever dollars they can. I think there's probably a lot of people that'll listen to this, going like what do you mean? I'm barely breaking even or I'm barely able to hit what I want with the income. How in the world am I gonna get rid of customers in a time where I need more money? Is the common response to this right. This reminds me of. It was a story. It was somebody that worked at TQL before I was there, but my boss told me this one. It always stuck with me, right, and here's why I think this matters a lot. But I think it also is a good story that points us out to everybody and really drives your point home. And it was so.

Benjamin Kowalski: 20:23

When you work there, right, basically, you can only get more support, more staff once you make more money. Like you literally can't just decide to hire now. In the real world, you could probably hire a little sooner or later, right and your choice. But the reality is it's still kind of the same thing, because if you hire too soon, eventually It'll catch up to you. If you hire too late, it could damage you in the same way. So let's just say that everybody shouldn't hire until they hit a certain benchmark. Right, and there it was okay. You don't get your. You don't get an employee to help you means you manage all of your business Just like an agent. Get your own customers, find your own customers, prospect them, cover your own loads, check, call them, make sure the money's paid. Everything cradle to the grave. You don't get your first person to help you until you have exceeded a 12-week average of four thousand dollars a week in profit.

Nate Cross: 21:11

Okay, so I mean talking, that's only 25k a month in GP.

Benjamin Kowalski: 21:16

Yeah, yes, so you got to do 16,000 a month and gross profit or four or four thousand dollars a week, right, in order to get your first employee right, and the story told me it was a broker that that hustled and made sales calls and was, by everyone's definition, a good broker, right? The story really where it matters, though, is he's like he'd been here for like a year and a half, two years, right, so he's been able to keep a job. He made it through the firing and, you know, was able to hang on and really believed he was like on his way to succeed. The problem was he was working with customers that were never really gonna pay him any more than they had to, right, and an example. This was he was basically working with lots of different load lists, like he might have had ten customers, and it was all we call like jump off, right, the lowest truck gets the load and then you run it right on that scenario with one person to help you, right, like he's only really able to do about 30 to 40 loads a week before he'd run out of time, meaning, literally, there's just no more hours in the day. You could work an extra couple hours every day to prospect a little more, maybe show up an hour earlier, but at the end of the day, like you could really maybe only squeeze maybe another four or five loads because his average margins right, or only like 11%, 12%. So he's you know, short freight, low dollar amounts, low percentage, because the commodities he was moving, right, we're like lumber and some of these building materials, we're there, just never, ever gonna pay any more than they have to to move it, because it never really has to get there any sooner than it Could needs to, right, yeah, so there's no urgency of time. It's not a risky commodity. Their low value it's just it'll get there. When it gets there, everybody's okay.

Benjamin Kowalski: 23:06

So on the outside it looks like this guy is succeeding right, but the reality is is like, if you know the business, you knew that he was just in a. He was just dying on the vine, as they say. Right, like he was never gonna grow any bigger. His only choice was to just sustain until he was tired and eventually quit because you can't grow anymore. And the problem is exactly what Nate pointed out. He's got enough customers that he's busy all day. He's moving loads all day and feels like he's doing the job and he is doing the job, but he wasn't doing it in a way that he was ever gonna be able to grow Because he never had time to prospect new customers, because all of his time went to servicing existing ones. And here's the kicker His book didn't change for six months to a year and he wasn't ever making enough money to actually earn a commission. He was making enough money to pay TQL, to keep his seat and Everybody at the company's happening because he's kicking 75% of the profit back into the company. But for him personally, he was never really earning a commission. So it's basically just earning his base salary and making the company more money and everybody's happy. But him.

Benjamin Kowalski: 24:13

And the hard lesson was Jason. The guy who was his manager, who was the guy who trained me, was my marriage. He was like I had to have a conversation with me. It's like look, it's in your best interest to fire at least 25 percent your customers. He's like I would suggest you fire half or all, because even though I know you're vested in them and you spend a ton of time and all these relationships, they're never gonna get you to where you want to go, earning 10k a month or whatever. That goal is right and that's how the story ended.

Benjamin Kowalski: 24:42

Was he did? He fired all of his customers started back from scratch and was able to build customers that now he could see where the value was and which ones he didn't want to work with. You first kind of need to make the mistake, to know who you shouldn't work with, to bang your head against the wall, to learn what you don't want to do. But again, to me, I always think of that when I am spending a lot of time with a customer and there's not really much return right now and I don't see it changing in the future, if there's no reason for them ever to change what they're paying or doing, even when the market changes, then you've got the wrong customer and you need to spend more time finding a better customer than you ever saying the ones that aren't gonna get you where you need to go.

Nate Cross: 25:23

Maybe think about One of the guys that our company at Pierce. He's not. He's not with Brokering for anymore. He went on to bigger and better things with another passion in his life. But he, he did the load list thing a couple years ago and was able to be successful with that until the market did what it did earlier last year. So, being that it's a we're a margin-based business, he could make decent money 10% margins when rates were double right. When the market shifted and rates got compressed, that 10%, a lot less money. And he's like, yeah, it's time to move on. Like I, you know, he's like I kind of rode the wave well, I could, and I was like, but I got this other passion that I want to go into and that was that. So, but yeah, but that's a good point.

Benjamin Kowalski: 27:24

I wanted. I want to run with that too, because this is something else that I think is not talked about a lot, but is also one of the reasons why brokers end up in that scenario in the first place. Right, like when this market flips and it inevitably will, right, maybe it's when someone else thinks it, maybe it's when we, maybe who knows when this will occur, but it will occur, right. That is inevitable, right, whether this market starts going up again, beginning of this year, middle this year or, as Tim pointed out, into 2025, it will happen. Right, when that market goes up, things will change and everybody's gonna run to the spot market, where all the money is right. The difference is the brokers that will have a career in this, that will outlive whatever that short-term market up tick is. Whether that's six months or eight months or two weeks doesn't matter.

Benjamin Kowalski: 28:12

Yeah, if you want to be able to survive in an up and a down market and have an actual career in this, right, yes, it's great when the opportunities will come, when this happens, and you should capitalize on them, because they are temporary. They will also not last forever. But you've got to also take a step back and go. How can I get some lower profitable lanes in with this customer. That, yeah, opportunity causes. I could probably make more with other people right now, but you know what? That will stay in an up and a down market, right, and that's what we talk about, not just living in the spot market.

Benjamin Kowalski: 28:46

If you just live in the spot market, as the saying goes, like, you will die by it, because when you're in a market like this, if you only can make money when the spot market is firing, as soon as that market flips, you will starve to death and will have no prospects to find and no opportunities to open a door.

Benjamin Kowalski: 29:01

If you, when the doors are all open and everybody needs help from all the brokers in the spot market, you've got to give enough. And what I mean by that is run some lower profit lanes for these customers too, with some carriers that can run these all year and in a lower market, so that you've got some consistent freight that maybe is running at 10 or 11 percent and maybe your other freight's at 26% in the hot market, right, but you want that lower margin freight in mixed in with your high profit spot freight, because that's what's going to sustain you when the market inevitably comes back down right, it does this all day long and it just astonishes me that everybody's like shocked, as if it never happens again. It's like get on a on a merry-go-round, and every time you got back to the beginning you were surprised like get laugh at that, but like, that's literally what happens, right?

Nate Cross: 29:47

Yeah, oh my god.

Benjamin Kowalski: 29:48

Here we are again. I never thought this was gonna occur. It's gonna happen and then it's gonna be over and we're gonna be back in this market. So like if you realize that you will likely make different decisions with your customers and the bids that you're gonna be doing Into the beginning of next year. Right, it's not all just Just Kill when you can and then starve when you can't, like there are other ways to survive in both types of markets.

Nate Cross: 30:11

And ideally we and we talked about this a lot is diversifying your book and that's one, one way to do it. It's gonna be really important. You know, it could be that Don't mean diversification can look a lot different ways. What you don't want to have is, you know, one Customer controlling your destiny, right? So in the case that you just mentioned, like load lists, right, one type of customers controlling someone's destiny, in that case it could be that you have one customer who is 95% of all your revenue. That's very dangerous as well. It could be that you diversify your commodity so they're not as Flexible throughout the year. If you're, if you have some different seasonal stuff, right? If, like I, we've got a guy that does Watermelons and, like he's pretty much just off right now because he has nothing to do until, yeah, you know, coming into the late, late winter once my net stuff starts to pick up around the country. So it's all. It's a matter of preference. If you want to have a stable, long-term, year-round work and a career, you've got to find some way to balance that out. So I do want to. Unless you have anything else on this, I want to shift back to the the market stuff.

Nate Cross: 31:19

So I pulled it up on sonar, the tender rejection. So we, you know we talked about this in the peak of COVID, when tender ejections were upwards of like 30%. And when we say tender ejection, this is when a contracted, a contract awarded lane is canceled by a carrier or by a broker, right, typically by a motor carrier though. So what'll happen is, let's say the carrier, let's say in late 2019, carrier fills out a bid and takes the load for 250 a mile, they get awarded that lane. And then you fast forward into 2020, right, when it's insane, rates are double that, right, of course they're going to cancel, they're going to reject that $2.50 awarded bid and go get spot freight for double the price. So if you see tender rejection up, that's when your spot market is going to be seeing a lot of activity.

Nate Cross: 32:22

So if you look at, if you've got so in our check it out, the ticker is OTRIUSA, it's outbound tender rejection index and that's domestic truckload in the US. So the average tends to be like five to 10% is like somewhat healthy. That's what you would consider as like a normal market and it peaked to almost 30 and then it dropped off in early first first half to middle of 22, which we all know. That's when the market started to shift and it got as low, as let's see here.

Nate Cross: 32:55

If I can get the actual number, it looks like it's about like about like two one to 2% earlier this year and it has since climbed back. It's almost at 6% now. So that tender rejection index is heading in the right direction and there's going to be a couple of reasons why that happens. Right, as rates go up, even if they slightly go up, carriers that have contracted rates at a lower amount are going to cancel those rates. They're going to reject the tender and go. You know, get that freight in the spot market, or it could be they went out of business, right, or what do you got Ben?

Benjamin Kowalski: 34:50

Or if rates stay the same and the shippers offer below or farther below even what the average is, that also causes rejection. So if the rates aren't changing but the shippers, like we were just talking about, overplay their hand and they push rates below what anybody actually can run them for, but they're willing to send a bid in for it, they believe that they got all these trucks, like you said, committed to all this freight. The reality is, is the trucks just go? Yeah, it looked good on paper, but you know what? I'm just going to go take the load for an extra 10 cents a mile in the spot market and then they don't pick them up.

Benjamin Kowalski: 35:26

I think the main reason why that rejection rate is going up is because of what the shippers are doing in the bids, and I think that's also why the contract rate, not the spot rate, the spot rate isn't coming up to meet the contract rate. The contract rate is being pushed down to where the spot market rate is right, yeah, and now it's getting pushed below it, and to me that shows that the shippers are the ones that are overplaying their hands and also, by the way, for all the carriers screaming at us from all those other content like that's literally why rates are where they are has nothing to do with brokers. It's shippers literally pushing the market as far as they can, because that's what they're always going to do until they can't push it anymore. Yep.

Nate Cross: 36:06

So another thing there too is one way in which the spot market will come up, because you mentioned it in a scenario where it stays the same, all is equal. The caveat there would be if your supply demand basically like your supply demand graph or chart for demand to ship and supply of trucks if that goes, if it ends up in an opposite place that it is now, you will see spot rates go up because there's going to be less trucks available compared to the amount of freight that has to be moved. Now how would that happen? Well, you can have capacity contract by companies going out of business, operators exiting the trucking fleet or trucking force, and the demand for shipping can go up. If, like you mentioned earlier, fed interest rates drop down and companies have more money to spend to reinvest into their business, consumers have more money to buy goods and do stuff like that.

Nate Cross: 37:11

So actually I want to read to you what my prediction was in freight caviar's little bit here. I've seen rates slowly start to creep up over the past couple of months and I expect it will continue into 24, with companies continuing to close. The gap between supply and demand Will shrink and lead us back to a sense of normalcy, but not overnight. I actually I had more to say, that's just what he wrapped it up to. But I also mentioned that the biggest determining factor is going to be the Fed interest rates and the presidential election, and next November, I think those will be your two big ones. I think your Fed interest rates are going to be the obviously, the more near to us as far as how quickly that could happen, because we kind of are at this soft landing. A lot of people predicted a recession this year and if you look at the market, if you're invested dude like S&Ps, up 20% this year.

Nate Cross: 38:09

No one saw that coming. That's that Both of them are at all-time highs.

Nate Cross: 38:13

Yeah, it's wild. So something's working obviously somewhere, but we're seeing, obviously, the kind of the short end of the stick and freight. But hey, the companies that are still here, whether you're an asset-based trucking company or a freight brokerage, non-asset-based 3PL we're all operating off of less money right now, and if you're still swimming or you're growing, like some of us are, it's going to be even that much more fruitful when the market gets to a better place, and I think we're headed there right now. I've personally been seeing it in our company's data since about six months ago. Obviously, I mentioned Sonar, and they're reporting the co-op of companies that submit data to them. I don't know what DAT yeah, I know. I mean we referenced DAT too, right, and they've got over 200 data sources that Ken mentioned, and we'll pick a spread on it next week. We're seeing that shift where you can either argue that we're not getting any lower or you can make the argument that we're starting to creep up. You just can't make the argument that, oh, the bottom's not here yet. I don't believe you can make that argument at least.

Nate Cross: 39:29

So it's been a wild year, though, man, I had a second to guy earlier today and I was like, oh, how's business been. He's in a totally different company. What he does, like he does 3PL and warehousing and stuff. He's like oh, he's like it's been a crazy year. He's like I've started to bait if it was the right choice this year to open up a physical office space and hire all those new folks. But like, and the reality is he'll be in a much better position spot when he's got a fully trained staff all under one roof when that demand kicks back up. Because what you don't want to do is you know you're running very lean right now and then all of a sudden boom, market changes, you get a lot more business, and then it's just you right and you don't have any help.

Nate Cross: 40:14

You didn't pre-plan for any of this. Don't go overboard and hire too quickly. But I think those are some interesting important things. To consider is that you know aiming high in your steering, as you would call it as a driver. But it's basically like thinking long term, right, have that vision out there of you know where you want to be and what needs to be true for you to be able to get there. So elsewhere, diesel rates, right. So if you think about this throughout the year, I mean it's kind of weird to think back like 12 months ago, but that's kind of what we do at the end of the year. If you are you looking at them right now, or can I give you a pop question and see what your brain remembers? You can ask me. All right, do you think diesel rates are higher or lower than they were 12 months ago?

Benjamin Kowalski: 41:01

I'm going to say they're definitely lower. I also think they're lower because I think that's one of the main reasons why also inflation has come down recently too. The defendants didn't necessarily have much to do with, but, like, gas prices and oil prices are down, so I'm going to guess that diesel is also down.

Nate Cross: 41:16

Yeah. So if you run, if you were to look at the chart on that, it looks like a. I don't remember if it's sine cosine or tangent, but it's one of those curves where, like it goes down, comes back up and then goes back down. So like it started at 471 a gallon a year ago, dropped down to 380 middle of the year, then went back up to 456 in September and is now down at 397. So we've dropped about 80 cents, which is about a 20% decrease in fuel prices in the last 12 months. So that again is going to add into your overall, your overall prices, obviously so. And also when I reference the spot rates before, how they've been flat or growing, that's including fuel. So when we've got fuel prices down but rates are either the same or going up, that means that your line hall is going up.

Nate Cross: 42:16

Okay, that's my other argument that I have, I like to stand on there, is that, even while gas prices have gone down, what you would think would lower your rates overall, your spot rates with fuel, have gone up, even if just slightly. So I think flatbed's the exception to that argument. Reefer and Van definitely showed it, though. So yeah, so you're getting the house on the market, or the year overall, the big. What kind of milestones do we have? Oh, we had our 200th episode a few months ago. Right, that was big, big project with DAT.

Nate Cross: 42:58

So if you're on the asset side with DAT, you'll be able to see some new education from us that is being offered through them sometime next year. That we worked on with them throughout this past year, a year of double brokerage and fraud man, it was a wild one, that's for sure.

Benjamin Kowalski: 43:18

That was probably one of the biggest things, I think this year stand out wise. It was just how prevalent fraud was and how much it's been in the news.

Nate Cross: 43:30

So I mean, we kind of talked about what to do with your book of business a little bit ago, but I do want to talk about you had a. I want you to tell a story that we talked about off air, and this is just about how to go the extra mile with a customer and there's a lot to be said about it. But talk about that a little bit, about little feedback you got from one of your shippers earlier.

Benjamin Kowalski: 43:48

Yeah, I was talking with her actually earlier today that's why I made a note about it and we were talking. I was asking what was coming on and actually the context of the conversation was, I think I had like something like 12 loads that we had scheduled. They got canceled, I think, got rescheduled and we couldn't work them in. And she was like yeah, I want to be able to get you a few more loads. She's like, in fact, I have. We didn't know that they shipped containers either. And she was like oh, yeah, we got like 20 of these containers we bring in every month. Can you take a look at them? And I was like, yeah, absolutely. And I didn't say anything about it outside of that. But what she said to me was she was like, yeah, you know what she was like. I try to give you as much of this as I can. And she's like I'd like to get you worked into some more of our business. I said, yeah, I really appreciate that. You know whatever else we can do to help you.

Benjamin Kowalski: 44:38

And then she said something and this is what we were talking about off air was she goes. You know, you're like the only person I work with that like actually spends the time to talk to me and I go what do you mean? I was like love chatting with you. I'm like, what do you mean, spend the time to chat with you? She was everyone else just sends an email. And she's like, yeah, I know I send emails to you and it's not like they're not more efficient when you need things done. She's like, but literally, you're like the only person that will just kind of ask me how my day was and then just listen and I'm like, oh yeah, I'm curious, I wanted to know how your day was, want to know how your holiday was, whatever, and I kind of made it seem not awkward by you know, making it not seem like that was a big deal because I didn't really think it was.

Benjamin Kowalski: 45:16

But after the call and I was really thinking I'm like that's what we talk about on this show all the time. Right, these little things, right. And when they come up and somebody points it out to me, it's what made me notice it, right, but it's that's the competitive advantage, right, the reason her other brokers are losing business and have been all year to me, and we just started working with her six, seven months ago, I don't know, middle of this year and again at the time when everybody else says you can't get shippers, we started working with them and we're getting more and more of their business and she told us why. It's because of this, like, on a Monday morning I asked her how our weekend was and listen and I care and actually have a conversation about it. Right, like I can tell you what they did for Christmas when her kids came over, and I mean, her kids are almost our age, in fact, they're probably closer to Steven's age than our kid's age, nate.

Benjamin Kowalski: 46:09

But the funny thing is, right, like it's really just simple things you would do with a coworker. Right, it's just a person to a person, like you just listen, you're there, you care about what's important to them outside of work and you make friends with them. And everyone thinks that's like a waste of time or that like you're too busy because you've got other things to do, like cover a load. But the reality is is like this is the glue, right, yeah, it is the value of every 3PL in the country. It isn't rates, it's not contracts, it's not carriers, it's that.

Nate Cross: 46:43

It's just that intangible thing of one person likes working with another person, because we talk about the no, like and trust spectrum, right, like you have to have all three of those to do business with somebody, typically right, and to cross from the no to the like is done by using the glue, like you just mentioned. Right, repore building, relationship building, going from just being in someone's public life to being somewhat let into their private life. Like you know, you find out about family and what they did for the holidays and stuff like that, and that makes somebody like you and then ultimately trust you. So I think that's very, very it's huge. That's why there are transactional freight brokers who do load lists that jump off right. If you want to get outside of that, you're going to have to change your approach and how you communicate and interact with your customers and that's going to be exactly just like what you just explained there for sure.

Benjamin Kowalski: 47:42

Well and again for people that are new and prospecting. Right, and you're like well, I don't have anybody that like even talks to me, yet it's using every single thing as an opportunity to talk to somebody is really the only strategy, right? They send you an email. Hey, can you get me a quote on this? Pick up the phone and call them, even if you know the answers. Like, I'll just pick up the phone, but okay, I just want to confirm this is a van load, right? This is the same as the other ones. There's nothing odd about this one. Just want to make sure pick up in the delivery of the same Both. First come, first serve. Nothing strange with this? I know there's nothing strange with it.

Benjamin Kowalski: 48:16

I just use that as an excuse to call the person and it mostly just gives me some more information about them. How's their day going? Hey, while they're there, they're probably going to tell me how their morning was. They're likely to tell me if they've got something else they might need help with. Or maybe they just want to vent about what happened last night and it's early in the day.

Benjamin Kowalski: 48:33

It's like yeah, just had a rough morning, car broke down and maybe they just want to get that off their chest and that just listening right there right, means that two or three hours later, when they need help with something else, who do you think the most likely person is for them to send that load to? If they've got to make a choice, it's coming to me you, exactly, because I talked to them and I spent two minutes asking them how their morning was, hey, how things go last night. Anything else Doesn't have to be some crazy speech or some big extravagant thing. You just talk to people and ask them how they're doing, then listen, and if you do that more, they will want to talk to you more and you'll learn more about whether or not there's opportunities to work on right. Yep, that's exactly right. It's really just that simple in most cases.

Nate Cross: 49:18

Wow, so 2023 in the books? Man, I like it. I like it. We got anything else to wrap up the year here.

Benjamin Kowalski: 49:26

I think that's about it. I'm anxious to dig in next week with Ken, talk a little bit about rates and getting to some of the numbers around things.

Nate Cross: 49:33

but Agreed, that'll be good one. Make sure you tune in for it, everybody, all right. Well, good dear, good dear, good deal. Good dear, good year and good deal That'll put a bow on 2023. Happy New Year, everybody. Hope you guys all have a fun and safe New Year's celebration. Any final thoughts, ben?

Benjamin Kowalski: 49:56

Whether you believe you can or believe you can't, you're right.

Nate Cross: 50:00

And until next time. Happy New Year's and Go Bells.